[{"@context":"https:\/\/schema.org\/","@type":"Article","@id":"https:\/\/moneydoneright.com\/personal-finance\/saving-and-budgeting\/how-to-make-a-budget\/#Article","mainEntityOfPage":"https:\/\/moneydoneright.com\/personal-finance\/saving-and-budgeting\/how-to-make-a-budget\/","headline":"How to Build Your First Budget in 5 Steps","name":"How to Build Your First Budget in 5 Steps","description":"Almost everyone in the world wants to improve their financial situation, and many take...","datePublished":"2020-11-09","dateModified":"2023-04-07","author":{"@type":"Person","@id":"https:\/\/moneydoneright.com\/author\/logan-allec\/#Person","name":"Logan Allec, CPA","url":"https:\/\/moneydoneright.com\/author\/logan-allec\/","identifier":4,"image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/6e74dd0453a5871d1dcfde6d40d9494765ca8bfdb01927cefee4564d4bee9075?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/6e74dd0453a5871d1dcfde6d40d9494765ca8bfdb01927cefee4564d4bee9075?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"Money Done Right","logo":{"@type":"ImageObject","@id":"https:\/\/moneydoneright.com\/wp-content\/uploads\/Money-Done-Right-Personal-Finance-and-Investing-Blog.png","url":"https:\/\/moneydoneright.com\/wp-content\/uploads\/Money-Done-Right-Personal-Finance-and-Investing-Blog.png","width":488,"height":60}},"image":{"@type":"ImageObject","@id":"https:\/\/moneydoneright.com\/wp-content\/uploads\/how-to-build-your-first-budget.jpg","url":"https:\/\/moneydoneright.com\/wp-content\/uploads\/how-to-build-your-first-budget.jpg","height":460,"width":1900},"url":"https:\/\/moneydoneright.com\/personal-finance\/saving-and-budgeting\/how-to-make-a-budget\/","video":{"@context":"http:\/\/schema.org\/","@type":"VideoObject","@id":"https:\/\/www.youtube.com\/watch?v=JPwTAVgMVSg#VideoObject","contentUrl":"https:\/\/www.youtube.com\/watch?v=JPwTAVgMVSg","name":"How to Build Your First Budget in 5 Steps","description":"Are you one of the 41% of Americans who have a budget or are you the other 59% who don't? Either way, this video will help you start a budget if you've never had one, and if you do have one, this video will help you manage your budget with some tips and tricks. \n\n\ud83d\udcd6 TABLE OF CONTENTS:\n0:00 Intro\n0:40 Step 1: Decide How You Want To Budget\n1:00 Mobile Budgeting Apps\n2:15 Step 2: Review Your Transactions\n4:25 Step 3: Figure Out Your Goals\n5:45 Step 4: Figure Out What To Do With Your Extra Money\n7:15 Step 5: Avoid Lifestyle Creep\n8:45 Outro\n\nFree Stuff\n\ud83d\udcb0 Get a Free Stock: http:\/\/go.moneydoneright.com\/WeBull\n\u26fd Get Cash Back on Gas: http:\/\/go.moneydoneright.com\/GetUpside\n\u26b0\ufe0f Free Life Insurance Quotes: http:\/\/go.moneydoneright.com\/QuotacyLife\n\ud83d\udcb3 My Favorite Credit Card: https:\/\/moneydoneright.com\/citi-double-cash-review\/\n\nOur Channels\n\u2705 Subscribe: https:\/\/www.youtube.com\/channel\/UCQ9WUXlSuLlbi5BLkgtEUEA?sub_confirmation=1\n\ud83d\udc68\u200d\ud83d\udc69\u200d\ud83d\udc66 Our Family Vlog: https:\/\/youtube.com\/TheAllecFamily\n\ud83e\uddb8\ud83c\udffb\u200d\u2640\ufe0f My Wife's Channel: https:\/\/youtube.com\/CarolineAllec\n\nSources\n- Bankrate: 63% of Smartphone Users Have At Least One Financial App\nhttps:\/\/www.bankrate.com\/personal-finance\/smart-money\/americans-and-financial-apps-survey-0218\/\n- Mint: 65% of Americans Have No Idea How Much They Spent Last Month\nhttps:\/\/blog.mint.com\/budgeting\/spending-knowledge-survey\/\n- Statista: Most Americans Lack Savings\nhttps:\/\/www.statista.com\/chart\/20323\/americans-lack-savings\/\n\nSummary of Steps:\n\nStep one in building your first budget is to decide how you want to budget. There's no right or wrong answer; you can budget with pen and paper, use a spreadsheet, or use a mobile app or website. Do whatever makes YOU most comfortable.\n\nStep two in building your first budget is to take a look at your transactions. You can find your transactions in your bank\/credit card statements and if you have an app, that should be able to link to your bank account and provide transaction history to you. Try to look back at least 1 to 2 months.\n\nStep three in building your first budget is to figure out your goals. This comes down to your own priorities, but the point is that you want to find the categories where you tend to overspend, then try to set a realistic target and make the changes necessary to reach that goal. Don\u2019t try to change your entire financial plan all at once, don\u2019t expect to cut your expenses in half, just start with something that\u2019s measurable and achievable.\n\nStep four in building your first budget is to figure out what to do with your extra money. If you're part of almost half of the Americans who have no savings at all,  I would say that your extra money should probably be going to a small emergency fund until you can give yourself more of a cushion. Once you\u2019ve made some progress with your savings you can start thinking about other financial obligations, whether that\u2019s paying off debts, putting money away for retirement, or saving for another long-term goal like tuition, a car, or a down payment on a house.\n\nStep five in building your first budget is to avoid lifestyle creep. Lifestyle creep is when you spend any additional income immediately instead of using it as an opportunity to save.\n\n#budgeting #personalfinance #money","thumbnailUrl":["https:\/\/i.ytimg.com\/vi\/JPwTAVgMVSg\/default.jpg","https:\/\/i.ytimg.com\/vi\/JPwTAVgMVSg\/mqdefault.jpg","https:\/\/i.ytimg.com\/vi\/JPwTAVgMVSg\/hqdefault.jpg","https:\/\/i.ytimg.com\/vi\/JPwTAVgMVSg\/sddefault.jpg","https:\/\/i.ytimg.com\/vi\/JPwTAVgMVSg\/maxresdefault.jpg"],"uploadDate":"2020-10-14T21:15:09+00:00","duration":"PT9M41S","embedUrl":"https:\/\/www.youtube.com\/embed\/JPwTAVgMVSg","publisher":{"@type":"Organization","@id":"https:\/\/www.youtube.com\/channel\/UCQ9WUXlSuLlbi5BLkgtEUEA#Organization","url":"https:\/\/www.youtube.com\/channel\/UCQ9WUXlSuLlbi5BLkgtEUEA","name":"Logan Allec","description":"Logan Allec is a CPA and the founder of Choice Tax Relief, which specializes in helping people with their IRS and state tax debt.","logo":{"url":"https:\/\/yt3.ggpht.com\/43_VKqrbO06RGMcxfdQbDXosrkVRq1yf5QgSQEiR4ILUGWV9fJtTh0o2ftYMYqVo6PwnEOPRdg=s800-c-k-c0x00ffffff-no-rj","width":800,"height":800,"@type":"ImageObject","@id":"https:\/\/www.youtube.com\/watch?v=JPwTAVgMVSg#VideoObject_publisher_logo_ImageObject"}},"potentialAction":{"@type":"SeekToAction","@id":"https:\/\/www.youtube.com\/watch?v=JPwTAVgMVSg#VideoObject_potentialAction","target":"https:\/\/www.youtube.com\/watch?v=JPwTAVgMVSg&t={seek_to_second_number}","startOffset-input":"required name=seek_to_second_number"},"interactionStatistic":[[{"@type":"InteractionCounter","@id":"https:\/\/www.youtube.com\/watch?v=JPwTAVgMVSg#VideoObject_interactionStatistic_WatchAction","interactionType":{"@type":"WatchAction"},"userInteractionCount":3646}],{"@type":"InteractionCounter","@id":"https:\/\/www.youtube.com\/watch?v=JPwTAVgMVSg#VideoObject_interactionStatistic_LikeAction","interactionType":{"@type":"LikeAction"},"userInteractionCount":438}]},"about":["Saving Money"],"wordCount":1259,"keywords":["schema"],"articleBody":"Almost everyone in the world wants to improve their financial situation, and many take drastic steps to do so.But believe it or not, there\u2019s a tool at your very fingertips that has the power to dramatically improve your overall finances: a budget.Yet despite the power of budgeting, only 41% of Americans have a budget that they stick to.In some ways, this is understandable. Creating (and following) a budget may seem daunting if you\u2019ve never done it before.But budgeting can actually be a simple process when broken into manageable steps.In this article I\u2019ll discuss five concrete steps you can take to set up your own budget and get your expenses under control. Watch my full video walkthrough below.Table of ContentsToggleStep 1: Decide how you want to budgetStep 2: Take a look at your transactionsStep 3: Adjust your spending habitsStep 4: Decide what to do with extra moneyStep 5: Avoid lifestyle creepStep 1: Decide how you want to budgetWhen it comes to building a budget, the best place to start is by deciding how you want to budget. Do you want to use a pen and paper, a spreadsheet, an app, or something else entirely?If you feel more comfortable doing things on desktop or mobile, you may want to consider using a free or affordable online budgeting resource like Mint, Personal Capital, or You Need a Budget (YNAB), all of which I\u2019ve tried and liked.And though you certainly don\u2019t need an app or website, these services can make budgeting significantly easier for you by linking to your accounts, automatically importing and categorizing transactions, analyzing spending patterns, and performing other time-consuming tasks.Every budgeting app has its own features, but the same general rules apply whether you\u2019re using YNAB, Mint, Personal Capital, or even a notebook.No matter how you choose to budget, there will be pros and cons, so it ultimately comes down to personal preference and what works best for you.And if a specific app or method isn\u2019t working for you, feel free to switch it out for something different; the goal is to find something that you know you\u2019ll be able to stick to.Step 2: Take a look at your transactionsAfter you\u2019ve decided how you\u2019re budgeting, the next step is to take a look at your transactions.To get a good idea of where your money is going, it\u2019s best to look back at your financial habits over a long period of time, as spending can fluctuate from day to day or week to week.It\u2019s okay to repeat this step and alter your budget when things change; as your life and circumstances shift, it\u2019s natural for your spending habits to shift too, so it\u2019s important that you stay flexible.If you\u2019re budgeting by hand, you can find your transaction history in your bank and credit card statements.You\u2019ll then need to go through your statements on your own, write down each transaction, and categorize each purchase.If you\u2019re using an app or website, you should be able to link it to your bank accounts and credit cards so that it can automatically import your transactions.Depending on the service you\u2019re using, these transactions may be automatically categorized, or you may need to go through them yourself.Regardless, by the end of this process, you should have a categorized list of purchases so that you know exactly how much you\u2019re spending in different categories each month.And perhaps more motivating in terms of budgeting, you\u2019ll also see how much \u2014 or how little \u2014 you\u2019re saving.At this point, you\u2019ve already accomplished a lot. In fact, according to a recent Mint study, only 35% of Americans know how much money they spent in the previous month, meaning you\u2019re already ahead of the majority of the country.Step 3: Adjust your spending habitsOnce you know what your spending habits actually are, the next task is to figure out what you want them to be. As always, this comes down to your priorities and what you think your spending should look like.In this step, you should find the categories where you tend to overspend, set a realistic spending goal, and then make the changes necessary to achieve that goal.Be sure to start with something measurable and achievable; Rome wasn\u2019t built in a day, and you won\u2019t be able to change all your financial habits at once.In general, you should repeat this process every month or two.Check your statements or app, see how your results compare to the goals you set, and then adjust your budget accordingly.If you managed to save that $50 on eating out, for example, you may be able to push for another $25 the next month.On the other hand, if you exceeded your goal for that category by $100 but were $100 below your goal in another area, you may want to consider changing your goals to more realistically fit your spending habits.Just know that while getting started is the hardest step, it\u2019s equally important to be consistent if you want to get the most out of budgeting.Related: 30+ Cash-Back Apps That Will Help You Save on Nearly AnythingStep 4: Decide what to do with extra moneySo far, I\u2019ve discussed budgeting as a way to reduce your expenses.And if you\u2019ve followed these steps so far, you should already be spending less than you were at first, leaving you with some extra money that you have to do something with.If you already have a savings account with a good amount of money, you can start thinking about your other financial goals.But almost 50% of Americans have no savings whatsoever, and nearly 70% have less than $1,000 in savings.If you\u2019re part of that 70%, I recommend using your extra money to set up a small emergency fund to give yourself more of a cushion.Once you\u2019ve made some progress in that respect, you can start putting money toward your other financial obligations, whether those include paying off debt, contributing to a retirement fund, or saving to meet a long-term goal.Related: 13+ Ways to Get Free StocksStep 5: Avoid lifestyle creepIn my opinion, cutting costs is perhaps the main reason to budget. However, that doesn\u2019t mean it\u2019s the only reason.In fact, one of the biggest problems people have with money is that no matter how much they earn, they always find a way to spend it.And if you aren\u2019t tracking your expenses, that can be really easy to do.However, in addition to helping control your spending habits, budgeting also gives you the means of thinking of any additional income as an opportunity to save; instead of spending your entire $1,000 raise, for example, you can save 25% and add the remaining 75% to your monthly spending categories.Like everything else, this ultimately comes down to what you\u2019re comfortable with; some save aggressively in order to retire early, while others only save 5-10%.Regardless, budgeting allows you to see all the ways in which you\u2019re wasting money, offering a chance to reevaluate those habits to see if you\u2019d be better off shifting some of your money to savings, retirement, or other long-term goals.Overall, budgeting doesn\u2019t mean you shouldn\u2019t have fun or spend money \u2014 it just gives you more control over your spending so you can ensure your money goes to things that matter to you."},{"@context":"https:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"Personal Finance","item":"https:\/\/moneydoneright.com\/personal-finance\/#breadcrumbitem"},{"@type":"ListItem","position":2,"name":"Saving And Budgeting","item":"https:\/\/moneydoneright.com\/personal-finance\/\/saving-and-budgeting\/#breadcrumbitem"},{"@type":"ListItem","position":3,"name":"How to Build Your First Budget in 5 Steps","item":"https:\/\/moneydoneright.com\/personal-finance\/saving-and-budgeting\/how-to-make-a-budget\/#breadcrumbitem"}]}]